Lawyer by day, hacker by night, proud Navy veteran, writer, promoter of civility in political discourse, Philadelphia and Penn State sports fanatic, practicing philomath, bibliophile, enigmatologist, and last but certainly not least, Dad and Husband.

Pages

27 February 2013

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Connecticut Retirement Plans and Trust Funds filed a class action lawsuit against Amgen to recover damages for securities fraud. This claim was based upon the allegation that Amgen had made material misrepresentations and omissions that affected Amgen's stock price. Before a class action can proceed, courts must follow several rules. One of those rules requires that “the questions of law or fact common to class members predominate over any questions affecting only individual members" (the predominance requirement). Amgen argued that the District Court should not certify the class unless Connecticut Retirement could meet this predominance requirement by proving the materiality of their claims. In other words, Amgen alleged that Connecticut Retirement should have to prove not just that Amgen made misrepresentations or omissions, but that Connecticut Retirement actually relied upon those misrepresentations or omissions. The Supreme Court ruled (in a 6-3 decision) that Connecticut Retirement did not have to prove this requirement to be certified as a class action. Rather, the predominance requirement to prove materiality was a question for the court to decide when the merits of the case are later considered. To do otherwise would require Connecticut Retirement to "put the cart before the horse." As a result, Connecticut Retirement's class action will be certified and they will be able to move forward in the lawsuit. The practical impact of this decision is that certain types of securities fraud class action lawsuits will be easier to certify because the plaintiff won't have to prove materiality at the certification stage.